If you’re thinking about starting a business, it’s important to have a plan. A business plan helps you figure out what you need to do to make your business successful. It helps you think about things like what you’re going to sell, who you’re going to sell it to, and how you’re going to make money.
Even though not every successful business starts with a plan, it’s a good idea to take some time to research your idea and the market you want to enter. This will help you understand what you need to do to make your business work.
What exactly is a business plan?
A business plan is a document that describes your business and all the important details about it. This includes things like what you’re selling, who’s in charge, how you’re going to make money, and how you’re going to run your business. Having a business plan can help you stay organized and make sure you’re on the right track to success.
Why write a business plan?
Business plans are frequently related to securing a loan since lenders use them to assess a company’s viability before investing in it. But even if you don’t require finance, there are still a number of compelling reasons to think about creating a business plan.
- Strategic planning: it helps you figure out what you need to do to get your business up and running. You’ll need to think about how much money you’ll need, how much time it will take, and what resources you’ll need to get started.
- Evaluating ideas: if you have a few different business ideas, writing a rough plan for each one can help you decide which one is the best. You can compare them and see which one has the highest chance of success.
- Research: writing a business plan requires you to do research on your customers and competitors. This will help you make better decisions about your business.
- Recruiting: if you want to hire people to work for you, a business plan can help you explain your vision to them. It can also help build their confidence in your business.
- Partnerships: if you want to partner with other companies, having a clear plan can make it easier for them to understand what you’re all about.
- Competitions: there are even competitions where you can win prizes for having the best business plan! So if you want to organize your thoughts and share your ideas with others, a business plan is a great place to start.
Business plan formats
When you want to start a business, you need to make a plan. This plan can be as short as one page or as long as many pages with lots of graphs and reports. There are different types of plans you can make, but the goal is to tell people the most important things about your company.
Traditional plan: the most common type of plan. This plan has a lot of sections and can be very long. Venture capitalist firms and lenders usually ask for this plan.
Lean plan: This plan is shorter and only has the most important information. Businesses use this plan to help new people join the team or to change their plans for a specific group of people.
Nonprofit plan: This plan is for companies that want to help people or do good things for the community. It has everything a traditional plan has, but also talks about how the company will make a difference. For example, a company that makes headphones for people with hearing problems might have a nonprofit plan. People who want to donate money to the company might ask to see this plan.
How to write a business plan in 9 steps
Starting a business plan can be scary, especially when you don’t know where to begin. But don’t worry, we’ve got you covered! The first thing you should do is create an outline. This means making a list of all the important things you want to include in your plan.
We even have a template you can use to help you get started. Once you have your outline, it’s time to start filling in the details. We’ve made it easy by breaking it down into sections, so you can take it one step at a time.
1. Draft an executive summary
An executive summary is a really important part of your plan because it’s the first thing people will read. The executive summary is like a summary of your whole plan, so it should include the most important things. It’s like a sneak peek that will make people want to read more.
Your executive summary should be one page or less. That might sound hard, but it’s doable! Here’s what you need to include:
– What your business does
– What your business wants to do in the future
– What you sell and why it’s different from other things
– Who you sell to
– How you plan on reaching your customers
– How much money you currently make
– How much money you think you’ll make in the future
– How much money you need
– Who’s involved in your business
Remember, the executive summary is really important, so take your time and make it great!
2. Describe your company
This portion of your business plan should address two basic questions: who you are and what you intend to do. Answering these questions with a firm description offers an overview of why you’re in business, what makes you unique, what you have going for you, and why you’re a solid investment bet.
Your company description should include things like:
– What kind of business you are (like a sole proprietorship or an incorporated company)
– What your business model is (how you make money)
– What industry you’re in
– Your business’s vision, mission, and value proposition (what you hope to accomplish and what you stand for)
– Some background information on your business or its history
– Your short and long term goals
– Your team, including key people and their salaries
Some of these things are easy to answer, but others might take some more thought. For example, your values are really important. You need to think about who your business is accountable to (like your employees, customers, and investors) and how you want to treat them.
So, that’s your company description! It’s like an introduction to your business. It tells people who you are, what you do, and why you’re awesome.
3. Perform a market analysis
Starting a business is exciting, but choosing the right market for your products is crucial for success. If you choose the wrong market, you may struggle to make sales. That’s why market analysis is an essential part of your business plan, even if you don’t plan on showing it to anyone else.
Estimating Your Potential Market
The potential market is the number of people who need your product. To estimate this, you need to do some research. Here are some tips to get started:
Understand your ideal customer profile. Look for government data about the size of your target group and projected changes to the number of people in your target age range.
Research relevant industry trends and trajectory. Find data about consumption patterns among your target audience and whether your industry is projected to grow or decline.
Make informed guesses. Base your estimates on as many verifiable data points as necessary for a confident guess.
Consult government statistics offices, industry associations, academic research, and respected news outlets covering your industry for market data.
SWOT Analysis
A SWOT analysis looks at your strengths, weaknesses, opportunities, and threats. This breakdown is often presented as a grid, with bullet points in each section breaking down the most relevant information. Strengths and weaknesses are listed first, with opportunities and threats following in the next row. With this visual presentation, your reader can quickly see the factors that may impact your business and determine your competitive advantage in the market.
SWOT Analysis Template
Get your SWOT Analysis Template. Use this free PDF to future-proof your business by identifying your strengths, weaknesses, opportunities, and threats.
Competitive Analysis
There are three overarching factors you can use to differentiate your business in the face of competition:
Cost leadership. Offer lower prices than the majority of your competitors.
Differentiation. Offer something distinct from the current cost leaders in your industry and stand out based on your uniqueness.
Segmentation. Focus on a very specific, or niche, target market, and aim to build traction with a smaller audience before moving on to a broader market.
To understand which is the best fit, you need to understand your business as well as the competitive landscape. Include a competitive overview in your business plan, even if you’re entering an established market. Identify direct competitors and explain how you plan to differentiate your products and business from theirs. If you can’t easily identify direct competitors, consider your indirect competitors—companies offering products that are substitutes for yours.
Remember, you’ll always have competition in the market, even with an innovative product. So, make sure to conduct thorough market analysis to give your business the best chance of success.
5. List your products and services
When you make a plan for your business, you need to talk about the things you sell or do. This is called your products or services. It’s important to give details about them so people who read your plan can understand what you’re all about. If you sell a lot of things, you can talk about them in general. But if you only sell a few things, you should give more information about each one.
For example, GoBliss sells many different kinds of Training, as well as other accessories for your training. In their plan, they would talk about each type of equipment and what makes it special.
You should also talk about any new things you’re going to sell soon and if you have any special ideas or things that make your business unique. And don’t forget to say where your products come from! If you make things by hand, that’s different than if you buy things from other places to sell.
6. Perform customer segmentation
Your ideal consumer, often known as your target market, serves as the core of your marketing strategy, if not your whole business strategy. You’ll want to keep this individual in mind when you make strategic decisions, which is why understanding and including them in your strategy is critical.
Describe a variety of general and particular demographic traits to provide a comprehensive summary of your potential consumer. Customer segmentation frequently involves the following:
- Their residence
- Their age range
- Their educational level
- Some typical tendencies of conduct
- What they do in their spare time,
- where they work, and what technologies they employ
- How much money they make
- where they are regularly used
- Their ideals, beliefs, or points of view
This information will vary depending on what you’re offering, but you should be detailed enough that it’s obvious who you’re attempting to reach—and, more crucially, why you’ve made the decisions you have based on who your consumers are and what they value.
A college student, for example, has different interests, buying habits, and cost sensitivity than a 50-year-old Fortune 500 executive. Your company plan and actions would be extremely different depending on who your target customer was.
7. Create a marketing strategy.
Your ideal consumer has a direct impact on your marketing efforts. Your marketing strategy should detail your present decisions as well as your future strategy, with an emphasis on how your ideas are a good fit for that target consumer.
If you’re going to invest extensively in Instagram marketing, for example, you should consider whether Instagram is a top platform for your audience—if it isn’t, you should reconsider your marketing strategy.
The majority of marketing strategies include information on four main topics. The level of information you offer on each will be determined by your company and the audience for your strategy.
Price. What are the prices of your products, and why did you choose those prices?
Product. What do you sell, and how do you set it out from the competition?
Promotion. How will you reach your ideal customer with your products?
Place. Where will your products be sold?
The majority of your strategy may focus on promotions since you can more easily go into practical specifics, but each of the other three areas is a crucial strategic component of your marketing mix and should be discussed at least briefly.
8. Develop a logistics and operations plan.
The routines you’ll implement to make your ideas a reality are logistics and operations. If you’re developing a business plan for your own planning purposes, this is still an important component to consider, even if you don’t need to include as much detail as if you’re looking for financing.
Cover all aspects of your intended operations, such as:
Suppliers. Where do you source your raw materials or where do you manufacture your products?
Production. Will your products be made, manufactured, wholesaled, or dropshipped? How long does it take to manufacture your products and ship them to you? How will you deal with a busy season or an unforeseen increase in demand?
Facilities. Where will you and your colleagues work? Do you intend to open a physical store? If so, where?
Equipment. What tools and technology do you need to get started? Everything from laptops to lightbulbs and everything in between is included.
Shipping and delivery. Will you handle all fulfillment tasks in-house or outsource them?
This part should demonstrate to your reader that you have a thorough understanding of your supply chain and good contingency plans in place to deal with any potential instability. If you are the reader, it should provide you with a foundation for making other crucial decisions, such as how to price your items to meet your expected expenditures and when you expect to break even on your initial investment.
9. Make a financial plan
Having a great idea for a business is not enough. You need to make sure your business is financially healthy to survive in the long run. People want to work with a business that they know will be around for a while.
Your financial plan should include three major views of your financials: an income statement, a balance sheet, and a cash-flow statement. You may also want to include financial data and projections.
Don’t worry, we have a spreadsheet template that includes everything you need to create an income statement, balance sheet, and cash-flow statement. You can even edit it to reflect projections if needed.
Income statement
Your income statement shows your revenue sources and expenses over a given time period. This helps you see the profit or loss your business experienced during that time. If you haven’t launched your business yet, you can project future milestones of the same information.
Balance sheet
Your balance sheet shows how much equity you have in your business. On one side, you list all your business assets (what you own), and on the other side, all your liabilities (what you owe). This provides a snapshot of your business’s shareholder equity.
Cash flow statement
Your cash flow statement is similar to your income statement, but it takes into account when revenues are collected and when expenses are paid. When the cash you have coming in is greater than the cash you have going out, your cash flow is positive. When the opposite scenario is true, your cash flow is negative. Your cash flow statement will help you see when cash is low, when you might have a surplus, and where you might need to have a contingency plan to access funding to keep your business solvent.
It can be especially helpful to forecast your cash-flow statement to identify gaps or negative cash flow and adjust operations as required. Download your copy of these templates to build out these financial statements for your business plan.
Tips for Creating a Small Business Plan
Know Your Audience
When you create a business plan, it’s important to know who will be reading it. This will help you tailor the language and level of detail to them. It will also help you make sure you’re including the most relevant information and figure out when to omit sections that aren’t as important.
Have a Clear Goal
If your goal is to secure funding for your business, you’ll need to put in more work and deliver a more thorough plan. If you’re just creating a plan for yourself or your team, you can be less detailed.
Invest Time in Research
Some of the most crucial information you’ll need requires research from independent sources. This is where you can invest time in understanding who you’re selling to, whether there’s demand for your products, and who else is selling similar products or services.
Keep It Short and to the Point
Your business plan should be short and readable—generally no longer than 15 to 20 pages. If you have additional documents you think may be valuable, consider adding them as appendices.
Keep the Tone, Style, and Voice Consistent
It’s best to have a single person write the plan or allow time for the plan to be properly edited before distributing it.
Use a Business Plan Software
Writing a business plan isn’t easy, but there are tools to help with everything from planning, drafting, creating graphics, syncing financial data, and more. Business plan software also have templates and tutorials to help you finish a comprehensive plan in hours, rather than days.
A few good options include:
LivePlan: the most affordable option with samples and templates
Bizplan: tailored for startups seeking investment
GoSmallBiz: budget-friendly option with industry-specific templates
For a more in-depth look at the available options, read Get Guidance: 6 Business Plan Software to Help Write Your Future.
Common Mistakes When Writing a Business Plan
Bad Business Idea
Not every idea is going to win. Sometimes your idea may be too risky and you won’t be able to get funding for it. Other times it’s too expensive or there’s no market. Aim for small business ideas that require little money and bypass traditional startup costs.
No Exit Strategy
Investors reading your business plan want to know one thing: will your venture make them money? If you don’t show an exit strategy, or a plan for them to leave the business with maximum profits, you’ll have little luck finding capital.
Unbalanced Teams
A great product is the cost of entry to starting a business. But an incredible team will take it to the top. Unfortunately, many business owners overlook a balanced team. They assume readers want to see potential profits, without worrying about how you’ll get it done. If you’re pitching a new software idea, it makes sense to have at least one developer or IT specialist on your team.
Missing Financial Projections
Your numbers are the most interesting part for readers. Don’t leave out your balance sheet, cash flow statements, P&L statements, and income statements. Include your break-even analysis and return-on-investment calculations to create a successful business plan.
Spelling and Grammar Errors
Some businesses think hiring a professional editor is overkill. The reality is, all the best organizations have an editor review their documents. If someone spots typos while reading your business plan, how can they believe you’ll run a successful company?
Prepare your business plan today
Even if you never intend to pitch investors, a business plan may help you establish clear, intentional next steps for your company—and it can help you uncover gaps in your strategy before they become problems. You now have a thorough guide and the information you need to assist you start working on the next phase of your own business, whether you’ve prepared a business plan for a new online business idea, a retail storefront, increasing your established firm, or purchasing an existing business.
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